In the first half of 2022, the Directors’ & Officers’ (D&O) insurance market has seen a significant decrease in total revenue and an increase in margins for Gallagher’s clients, according to a report by the insurance company.
In the report, Gallagher’s experts pointed out that although there are signs of price stability, a major geopolitical event, such as Russia’s invasion of Ukraine, could cause a change in the market.
However, it said that from D&O, it has become a real issue for a few companies due to having a Russian presence or having sanctions.
was placed on them.
It added that since the effects of inflation will take time to manifest and D&O claims are long-term in nature, current rates are expected to remain unaffected for the time being.
During H1 2022, according to the report, the life sciences market has seen competition intensify, both in the primary and secondary segments. In addition, further market manipulation has seen carriers willing to book less inventory and less protection. A trend that is expected to continue.
The manufacturing and construction sector continues to be affected by supply chain disruptions, changing consumer behavior and increasing demand, according to the report. In addition, restrictions on free movement and economic growth caused by COVID-19 and Brexit have also had short- and long-term impacts.
Handling dangerous goods remains a concern for insurers. Environmental, Social, and Governance (ESG) requirements are on the rise, and companies are now expected to demonstrate how they can achieve their ESG goals, the report emphasized.
The results and outlook seem to be starting to improve on the post-pandemic road to recovery for many companies that own the Natural Resources sector (and their D&O insurers).
However, researchers have shown that the risk market in this sector is growing. ESG goals and guidelines have prevented some companies from acquiring large amounts of insurance (especially coal, nuclear and oil and gas companies).
In addition, the report indicated that clients with personal or property assets in Russia, Belarus and/or Ukraine are finding that insurers are increasingly scrutinizing the impact of sanctions and their exposure.
Gallagher also noted that after the pandemic, the retail and hospitality industry has become more downsized and less protected than in the past two years.
As for the technology sector, experts said that although technology companies continue to be considered high risk (in contrast to 2020 and 2021), insurers are keen to provide transparent coverage and pricing. Something Gallagher hopes to continue throughout the year.
In fact, Gallagher said, at the time of writing, Australian D&O insurers were looking to resell. In addition, experts noted that ESG risks in the region require special attention.
Canada has seen a small increase in the entry and exit levels, this is expected to continue, however, as competition increases. According to the report, the Canadian D&O market is not soft. It showed that there is still a lack of interest in the nature of risk and that underwriting is common.
On the other hand, with the coming relief especially in the form of cost reduction, the UK and European markets have softened significantly in H1 2022, according to the report.
However, the report also noted that difficult global events, supply disruptions, rapid inflation and volatility in commodity prices are preventing the market from softening.
The South African D&O market continues to be diverse. Gallagher said about the place
Underwriters “continue to shy away” from companies listed in the US in particular and have less interest, adding that London remains the go-to market for these clients.
Increased competition in almost all sectors – leading to significant change – is predicted in the US D&O market for the rest of the year. Analysts noted that inflation eased in 2021, which peaked in Q1 2022 with some rates falling, or falling, at times.
“It’s often felt that the difficult D&O market has been consigned to historic times in the US as results improve and competition returns,” Gallagher said. It added: “We predict that 2022 D&O rates will continue to decline and that many companies will see significant improvements in their restructuring.”
Despite the optimism, Gallagher wants to be cautious, he said:
“The market is still fragile due to past events, and the backlog of open-source securities cases has a significant impact. In addition, recent developments in high-profile (and expensive) projects and interest in ESG issues may lead to future challenges.”
Analysts pointed out that there are several factors to consider in the D&O Market of 2022. These include that underwriters will place more emphasis on ESG issues, a deeper focus on cyber security and cyber insurance, the nature of the pandemic and business challenges related to economic uncertainty.
Finally the report said: “Therefore, you can expect that each customer’s market and specific industry, loss, location, financial health, relationship and other personal accounts will have a significant impact on D&O recovery.”